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Neophobia vs. Innovation

Deirdre is delightfully right about many things, including the fact that the Accumulators are wrong. I should have taken more time to acknowledge what a struggle still lies ahead to persuade most of the academic world, let alone the rest of humanity, that the great economic expansion of the past 200 years did not come by piling up “resources” that were stolen from others, or from Gaia. The non-zero-sum message has not yet got through. So yes, compared with that, our little differences are trivial. Her use of innovation as a synonym for growth is a masterstroke.

This is also a good place to recall that in church history, the word “innovation” often means “heresy.” I reckon it still does in many other places. Sitting through a committee meeting discussing a change in government policy yesterday, I was amazed afresh by the neophobic pessimism of the great and the good. The fact that this change might mean an opportunity for the organization in question seemed utterly foreign. Even firms are artful at suppressing and discouraging innovation. Left to their own devices (e.g., nationalized) they would settle into comfortable and conservative monopolies ill-serving their customers. It is markets, not profit-seeking, that cause innovation.

So, like Greg, I am not entirely sure that Deirdre is right to identify a moment when people began to admire innovators. Have they ever? My favorite quote from the seventeenth century economist, doctor and tycoon William Petty, could have been written today, rather than in 1679: “When a new invention is first propounded, in the beginning every man objects and the poor inventor runs the gauntloop of all petulant wits.”

Deirdre says I think it is all quite Smithian, but objects that the Mediterranean was full of Smithian trade under the Ottomans. Well, remember piracy. I just read a tremendous book called Empires of the Sea by Roger Crowley, about the wars waged in the 1500s using slave galleys by the Ottomans and their corsair proxies against the Spanish and the Pope’s forces and their Maltese-knight proxies. Broadly speaking every penny Charles V made by selling Peruvian silver went to building ships and abducting slaves to man them, before destroying both in storms, plagues, and battles. In the process, the entire Mediterranean littoral was badly depopulated by slave raiders. The result was a negative sum game and a world in which Smithian growth was impossible. But what interests me most was that the only people who emerged with a smidgen of moral credit were the Venetians, because they kept surreptitiously doing Smithian deals with the Ottomans when the Pope wasn’t looking and were most reluctant to join in the galley game till their hand was forced. Pious people denigrated their despicable commercial obsession, just as the clerisy today denigrates commercialism. Yet it was the source of their relative virtue.

So how much wealthier would the Ottoman and Spanish empires have grown if they could have stopped routinely plundering their own Smithian profits for warfare and waste.

By chance, Tim Worstall reminded me yesterday after reading my first post of Deepak Lal’s distinction between Malthusian, Smithian, and Promethean growth. Under Lal’s definitions, Malthusian growth is innovation that raises living standards only to see them reduced again by rising population. Smithian growth comes from trade and the division and specialization of labor. Promethean growth comes from the amplification of labor by new forms of energy. This is probably a simplification too far but it helps me rephrase my coal argument again, because I cannot quite see the non-sequitur in it yet. I don’t think Allen, or I, would accept the Chinese use of coal as a counter-argument, because Kenneth Pomeranz argues that the remoteness of the Chinese coal districts made coal rarely competitive with wood. Nor is the fact that the Swedes had a wood-based iron industry a killer point, because Sweden’s prosperity was lifted by trade with Britain.

So let me try this formulation. Energy technologies are specially different from others not because they substitute but because they amplify, and they go on doing so more and more. So the key is that a shilling spent on labor could only get a limited amount of work done, whereas a shilling spent on coal could get more and more work done as the efficiency of the technology improved. True, you could amplify your work with a spinning jenny or an ox or a stream-driven mill — but all of these faced diminishing returns. Either the limits of the spinning jenny were quickly reached, or the land to feed your ox from, or the streams to power your mill wheel. A shilling spent on steam in 1900 got you many times more work than a shilling spent on steam in 1800. The same was not true of labor, oxen, or water mills.

I must be missing something. People as clever as Deirdre and those she mentions may see a flaw here that I cannot yet see.

But let me also defend the secondary nature of ideas. Deirdre’s examples of ideas that changed the world do not seem to me persuasive. Abolitionism struggled to achieve anything against commercial self-interest, but quickly triumphed when it suited the commercial class who were newly wealthy and on the prowl for causes. As I say in my book, it is eloquent that the first big coal-fired cotton mill opened in the same year that the slave trade was abolished. Did Harriet Beecher Stowe and Erskine Childers really cause the feelings that started wars, or did they give eloquent voice to feelings that were already present? For me the new realization that materialist technology leads to new ideas is new and thrilling – and I got it mostly from reading about technology. I get it from reading Terence Kealey and Kevin Kelly and Steven Berlin Johnson and Yochai Benkler and Eric von Hippel and Michael Heller.

So while I enthusiastically apply for membership of the Humanomics movement, I still raise a few questions still about the direction of causality.

Also from This Issue

In this month’s lead essay, Deirdre McCloskey summarizes the argument of her forthcoming book, Bourgeois Dignity: Why Economics Can’t Explain the Modern World. She argues that while the modern world rode an economic tide, the tide did not have economic causes. Changes in thinking and, yes, in rhetoric did the real work. Neither thrift, nor greed, nor the Protestant ethos are at the heart of this transformation, which brought material prosperity to whole classes that had never before known it. A variety of possible causes must be dismissed, she argues, from foreign trade, to legal institutions, to coal. The dignity and liberty of the bourgeoisie are the keys to economic transformation.

Gregory Clark argues that cultural or intellectual developments, like the rise of the bourgeois virtues, ultimately can’t explain the modern world. Not only were such virtues around long before the Industrial Revolution, but they have come and gone throughout many different societies over thousands of years. Why, then, did the Industrial Revolution only happen so recently, and only once? Worse, if we accept that cultural changes brought modern prosperity, we face the prospect that future changes in intellectual fashion may rob us of prosperity as easily as it was bestowed. This he finds both unfortunate and, thankfully, unlikely.

Matt Ridley makes two connected points: First, surges in creativity and innovation are far from unique. They can be observed throughout history, and they are usually connected to increases in trade and specialization. In this sense, Britain during the eighteenth century was not exceptional.

Second, however, Britain was exceptional in another respect – it had large reserves of coal, and it began putting them to use. Cheap energy helped ensure that the boom in innovation didn’t die out. Entrepreneurs won out against plunderers in part because they had this resource at their disposal, and because they could make the case for the benefits of innovation so easily. It was only after the switch to a coal-driven economy that wages finally began to rise for the typical British worker. They continue to do so today thanks to coal and to other sources of cheap energy that have since been discovered and exploited.

Jonathan Feinstein suggests that the revolution in human creativity is still underway, and that we have not yet fully recognized what it means to be creative. The science of creativity, he argues, is key here, as the creative process is very different from what most people imagine it to be.

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